WASHINGTON — The leaders of some of America's largest banks defended their institutions from a wide array of attacks from lawmakers of both political parties during their testimony in the House Financial Services Committee Wednesday.
The hearing, which was still ongoing as of this publication, featured sworn testimony from the CEOs of JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, U.S. Bancorp, Truist Financial and PNC Financial Services Group.
The subject matter of the hearing, which was led by House Financial Services Chair Maxine Waters, D-Calif., ran the gamut of financial policy. The bank leaders were grilled on their long- and short-term expectations for the U.S. economy, the potential impact of capital reform under the Biden administration, banks' investments in Russian and Chinese markets and the future of oil and gas lending.
"Our nation continues to battle an ongoing epidemic, inflation, that's affecting every household's budget, Russia's invasion of Ukraine, rising interest rates and other crises that have battered our economy," Waters said in her opening remarks. "In this environment, the role that banks play to protect consumers and provide access to affordable credit is absolutely critical."
The approach taken by the bank CEOs assembled on Capitol Hill for Wednesday's hearing — including Jamie Dimon of JPMorgan, Jane Fraser of Citigroup, Brian Moynihan of BOFA, Charlie Scharf of Wells Fargo, William Rogers Jr. of Truist, William Demchak of PNC and Andy Cecere of U.S. Bank — varied from institution to institution.
The CEOs representing the largest regional banks in the U.S. were genteel and emphasized what they described as a conservative approach to risk at their institutions.
"We have earned a reputation for being well-managed, financially sound, and responsible in our approaches to underwriting and risk," Cecere said. Demchak echoed that sentiment, describing his institution as a "Main Street banking organization focused on traditional banking activities."
CEOs of the megabanks, on the other hand, were more defensive. Dimon at times verged on pugilistic in his remarks and responses to lawmakers, describing the country's largest banks as "a force for good for the country, its citizens, and the global economy."
"The free flow of credit and investments is key to our nation's global competitiveness. Free enterprise is the flywheel of the economy as capital seeks out the investments, individuals and ideas that drive growth and innovation," Dimon wrote in his prepared testimony. "And free enterprise celebrates, and is inseparable from, human freedom and creativity, which ultimately are the stimuli for all human progress."
Many, but not all, of Republicans on the committee expressed displeasure that the hearing was happening in the first place. Ranking member Patrick McHenry, R-N.C., described the event as "theater, not oversight."
"We're going to hear Democrats encourage banks to make lending decisions based off woke politics rather than creditworthiness," McHenry said in his opening remarks. "We're going to talk about social issues rather than economic issues, though we're an economic committee."
But other Republicans had tough questions for the CEOs, particularly for the megabanks with substantial international business interests in China.
Rep. Blaine Luetkemeyer, R-Mo., pressed Dimon and BofA's Moynihan on whether their banks would cease business and operations in China if the country were to invade Taiwan, a long-running concern for national security experts.
"Your investments play a significant role in supporting those nations' economies," Luetkemeyer said to Dimon and Moynihan. "Should the [Chinese Community Party] follow through on its threat to invade Taiwan, are your banks prepared to pull your investments out of China?"
Both Dimon and Moynihan suggested they would follow the government's recommendations in such an event. "The first thing I would do is call the American government and ask for guidance," Dimon said. "That's what I would do. That's what they would expect me to do."
The shadow of capital reform among the Biden administration's financial regulators also hung over much of the hearing. Michael Barr, the Federal Reserve's vice chair for supervision, suggested earlier this month that "holistic" capital reform could be in the works.
The CEOs gathered on Wednesday were adamant that the nation's banks are more than adequately capitalized today. McHenry asked Dimon to explain the risks of a too-onerous capital regime.
"There's a cost to this," McHenry said, "and it changes the behavior of the institution, which means you don't lend as aggressively on the margins."
"Yes, and unfortunately, some of that's going to happen when things get worse," Dimon replied. "JPMorgan will be sitting with a trillion dollars, unable to deploy to help our clients."
Rep. Ed Perlmutter, D-Colo., at one point asked the panel if "everybody feels you're well-capitalized," to which the CEOs responded with a chorus of "yes."
"You don't have to take our word for it," Moynihan said. "Look at the stress tests for 10 years in a row."
Conversation briefly revolved around overdraft fees and reform, a cause that has been championed in recent years by Rep. Carolyn Maloney, D-N.Y. During Wednesday's hearing, Maloney asked the CEOs to reflect on the state of overdraft reform, much of which has been led by the country's largest banks.
Moynihan stressed that Bank of America's size was a critical component of what allowed the institution to
The CEOs were pressed on their fossil fuel investments by progressive lawmakers. Dimon argued that policymakers could not afford to steer investments and credit away from the traditional oil and gas sector, despite the risks of climate change.
"We aren't getting this one right," Dimon said. "The world needs 100 million barrels of oil and gas every day, and we're gonna need it for 10 years. To do that, we need proper investing in the oil and gas complex."
A handful of Democratic lawmakers targeted Wells Fargo CEO Charlie Scharf throughout Wednesday's hearings. Chair Waters focused exclusively on Wells Fargo during her questioning time, asking Scharf whether the bank had done enough to redress its past wrongs, including the
"It is not all clear that you're doing enough to finally break the pattern of repeat offenses," Waters said.
"Though our work is not complete, Wells Fargo approaches issues differently and as a better company than when I arrived," Scharf said in his opening remarks.
Other Democratic lawmakers — namely Reps. Cynthia Axne, D-Iowa, and Ayanna Pressley, D-Mass. — pressed Scharf on an ongoing effort among Wells Fargo employees to unionize. Pressley asked Scharf whether he would commit to be "neutral" towards the effort.
Scharf would not commit to answering yes or no, saying that the bank believed it was best "to have a direct relationship" with its workers, and that Wells Fargo "will follow the law" around unionization and retaliation.
"After years of scandal and billions of dollars of fines, you owe your employees accountability," Pressley said. "If there had been a union at Wells Fargo, then perhaps the toxic policies and behavior driving these scandals would not have gone unchecked for so long."
Pressley subsequently asked the rest of the CEOs if they would commit to being "neutral" toward potential unionization drives at their banks. The CEOs declined to make such a commitment beyond saying they would follow the law and not retaliate against their employees for organizing.
